LabCorp 2009 Annual Report Download - page 60

58 LABORATORY CORPORATION OF AMERICA
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
Rental expense, which includes rent for real estate, equipment
and automobiles under operating leases, amounted to $182.9,
$175.1 and $158.9 for the years ended December 31, 2009,
2008 and 2007, respectively.
At December 31, 2009, the Company was a guarantor on
approximately $2.5 of equipment leases. These leases were
entered into by a joint venture in which the Company owns a
50% interest and have a remaining term of approximately
three years.
16. Pension and Postretirement Plans
Pension Plans
The Company maintains a defined contribution retirement plan
(the “401K Plan”) for substantially all employees. Company
contributions to the plan are based on a percentage of employee
contributions. The cost of this plan was $15.2, $15.5 and $14.8
in 2009, 2008 and 2007, respectively.
In addition, substantially all employees of the Company are
covered by a defined benefit retirement plan (the “Company
Plan”). The benefits to be paid under the Company Plan are
based on years of credited service and average compensa-
tion. The Company’s policy is to fund the Company Plan with
at least the minimum amount required by applicable regula-
tions. The Company made contributions to the Company Plan
of $54.8, $0.0 and $0.0 in 2009, 2008 and 2007, respectively.
The Company’s nonqualified supplemental retirement plan
(the “PEP”) covers its senior management group and provides
for the payment of the difference, if any, between the amount
of any maximum limitation on annual benefit payments under
the Employee Retirement Income Security Act of 1974 and the
annual benefit that would be payable under the Company Plan
but for such limitation. The PEP is an unfunded plan.
In October 2009, the Company received approval from its
Board of Directors to freeze any additional service-based credits
for any years of service after December 31, 2009 on the Company
Plan and the PEP. Both plans will be closed to new entrants.
Current participants in the Company Plan and the PEP will no
longer earn service-based credits, but will continue to earn interest
credits. In addition, effective January 1, 2010, all employees
eligible for the 401K Plan will receive a minimum 3% non-
elective contribution (“NEC”) concurrent with each payroll period.
The NEC replaces the Company match, which will be discontinued.
Employees are not required to make a contribution to the 401K
Plan to receive the NEC. The NEC will be non-forfeitable and
vests immediately. The 401K Plan also provides discretionary
contributions of 1% to 3% of pay for eligible employees based
on service.
The Company believes these changes to the Company Plan,
the PEP and the 401K Plan will align the Company’s retirement
plan strategy with prevailing industry practices and reduce the
future impact of market volatility on the Company Plan.
As a result of the changes to the Company Plan and PEP
which were adopted in the fourth quarter of 2009, the Company
recognized a net curtailment charge of $2.8 due to remeasure-
ment of the PEP obligation at December 31, 2009 and the
acceleration of unrecognized prior service for that plan. Projected
pension expense for the Company Plan and the PEP is expected
to decrease from $36.6 in 2009 to $10.4 in 2010. In addition,
the Company does not plan to make contributions to the
Company Plan during 2010. The implementation of the NEC is
expected to increase the Company’s 401K costs and contri-
butions by an additional $22.5 in 2010.
The effect on operations for both the Company Plan and
the PEP are summarized as follows:
Year ended December 31,
2009 2008 2007
Service cost for benefits earned $ 20.8 $ 20.0 $ 19.1
Interest cost on benefit obligation 18.3 17.2 16.0
Expected return on plan assets (17.3) (22.2) (22.7)
Net amortization and deferral 12.0 2.8 2.1
Curtailment cost 2.8 – –
Executive retirement charge – 1.7 –
Defined benefit plan costs $ 36.6 $ 19.5 $ 14.5
Amounts included in accumulated other comprehensive
earnings consist of unamortized net loss of $102.6. The accu-
mulated other comprehensive earnings that are expected to be
recognized as components of the defined benefit plan costs
during 2010 are $7.5 related to amortization of net loss.
A summary of the changes in the projected benefit obligations
of the Company Plan and the PEP are summarized as follows:
2009 2008
Balance at January 1 $ 292.7 $ 287.2
Service cost 20.8 20.0
Interest cost 18.3 17.2
Actuarial loss (gain) 24.1 (11.8)
Amendments 0.9 4.6
Benefits and administrative expenses paid (24.1) (26.2)
Plan curtailment (4.7) –
Executive retirement charge – 1.7
Balance at December 31 $ 328.0 $ 292.7